Fed Govt Opens N962m July Bonds For Trading On The Exchange

By Taofik Salako, Deputy Group Editor for Business

The Federal Government has listed its latest issues under its Federal Government of Nigeria Savings Bond (FGNSB) on the Nigerian Exchange (NGX) Limited.

The listing of the two tranches of the FGNSB issued earlier this month paved the way for bondholders to trade in their holdings.

The government had offered a two-year FGN savings bond maturing July 14, 2023 at a coupon of 8.35 percent per annum. At the same time, it also offered a 3-year FGN savings bond, maturing July 14, 2024 at a coupon of 9.35 percent per annum. The July 2021 offer was the 49th tranche of the savings bond, which was launched in 2017.

The application list for the two tranches of bonds for July 2021 was opened on July 5, 2021 and closed four days later. The settlement date for the issuance became effective on 14 July 2021.

Regulatory documents revealed that the government raised about N962 million under the savings bonds in July, despite a cut in coupon rates.

A total of 341,012 units of the two-year bond valued N341.01 million were quoted at a par value of N1,000, while a total of 620,986 million units of the three-year bond valued N620,986 million were listed at a face value of N1,000.

The coupon payment dates for the bonds, which pay quarterly interest, are October 14, January 14, April 14 and July 14, respectively.

Coupons or interest rates on July’s issues were lower than rates paid on past months’ issues. The fall in yields in July was the first decline in the recent surge in government savings bond yields.

In June 2021, the government had tendered its two-year FGN savings bond maturing June 16, 2023 at a coupon of 8.889 percent per annum. It also offered a three-year FGN savings bond maturing June 16, 2024 at a coupon of 9.889 percent per annum.

Usually the minimum subscription of the bonds, offered at N1,000 per unit, is N5,000 or five units and thereafter in multiples of N1,000, with a maximum subscription of N50 million.

The FGNSB was introduced in 2017 as a mass instrument for national mobilization of savings and investments. Minimum subscription on the FGNSB is usually N5,000 while the bond pays quarterly coupon or interest.

GTI Securities Limited, one of the licensed distribution agents for the FGNSB, noted that the savings bonds help deepen the national savings culture while at the same time giving Nigerians the opportunity to contribute to and benefit from national development regardless of income level.

According to the brokerage firm, FGNSB allows Nigerians to participate in and benefit from the favorable returns in the capital market.

GTI Securities noted that the savings bonds are acceptable as collateral for loans by banks and can be sold for cash on the secondary market before maturity.

The bonds are usually listed on the Nigeria Stock Exchange for trade, providing liquidity to investors looking to exit before maturity.

Savings bonds are good for savings for retirement, marriage, school fees and home projects, among others, while ensuring their security as the bonds are backed by the full trust and credit of the Federal Government of Nigeria.